Archives - Business: Page 32
Author: paul carson (Thu Jul 06, 2006 1:55 am)
Title: Investors Watching Bernanke
Investors are looking for signs that Mr. Bernanke, like the veteran Alan Greenspan who preceded him at the Fed, can manage a tricky transition, achieving a “soft landing” from a period of strong economic growth and rising inflation to an era when underlying inflation slows without throwing the economy into a chaos.
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While it is a very important job, the Chairman does have 11 other members on his Open Market Committee to advise him. These members were around during the Greenspan era and know their tasks well. I have no doubt that they will achieve the "soft landing" needed during our transition to a period of economic slowdown. Investing has its up's and down's, this is just another part of the cycle.
I am expecting a "soft landing" for the transition of the new Chairman, mainly because of his 11 advisors who have been around for a while. However, what does concern me is the Chairman's desire for the theatrics. The way he announces news seems to over dramatise situations creating false market results.
Very true. That is one major criticism of Bernanke. Investors would rather he open his mouth only to tell them the latest results on the economy...then close it.
Bernanke is to report to the US Government on the current state of inflation. Many investors are hanging on to the every word of Bernanke who may decide to raise interest rate just to prove himself active in the assault against inflation. However, a problem may accure if he tightens the economy too much, because the market is being run by fear right now and it is not in as bad a shape as speculated. Many people are beginning to realize that this is a time for stock buying because it is possible to get "Best of Bread" stocks for historically cheap prices. Bernanke needs to realize that the future of the American market is more important than his job security.
While his job security is probably a concern for Bernanke, he doesn't have the final say in the discount and Fed Funds rate changes. As we said, the Open Market Committee decides what monetary policy to engage. They aren't in such a precarious position as Bernanke because they are elected officials for a preset amount of time. I agree that the economy doesn't seem to be as troubled as reports indictate. I would say it appears to be run by fear and speculation right now. The world is in constant turmoil and unrest, which could explain our concerns here at home.